None

It appears that the USD is no longer the cleanest dirty shirt - but precious metals, perhaps? And amid all this chaos in fiat and non-fiat currency markets, equities and bonds remain somewhat stoic. This is the biggest 2-day drop in the USD in 19 months. These are chaotic movements in colossal markets (that dwarf equity market capitalization) - but of course, none of that matters.

“The Federal Reserve, any central bank, should not be asked to do too much to undertake responsibilities that it cannot responsibly meet with its appropriately limited powers,” Volcker said. He said a central bank’s basic responsibility is for a “stable currency.” “Credibility is an enormous asset,” Volcker said. “Once earned, it must not be frittered away by yielding to the notion that a little inflation right now is a good a thing, a good thing to release animal spirits and to pep up investment.”  “The implicit assumption behind that siren call must be that the inflation rate can be manipulated to reach economic objectives,” according to Volcker. “Up today, maybe a little more tomorrow and then pulled back on command. Good luck in that. All experience demonstrates that inflation, when fairly and deliberately started, is hard to control and reverse.”

"While certain types of rehypothecation can be beneficial to market functioning, if collateral collected to protect against the risk of counterparty default has been rehypothecated, then it may not be readily available in the event of a default. This, in turn, may increase system interconnectedness and procyclicality, and could amplify market stresses. Therefore, when collateral is rehypothecated, it is important to understand under what circumstances and the extent to which the rehypothecation has occurred; or in other words, how long the collateral chain is... Financial intermediaries should provide sufficient disclosure to clients when collateral assets posted by them are rehypothecated; rehypothecation should be allowed only for the purpose of financing the long position of clients and not for financing the own-account activities of the intermediary; and only entities subject to adequate regulation of liquidity risk should be allowed to engage in the rehypothecation of client assets."

Tim Cook was in the media yesterday saying that market share doesn't matter, profits do. Ahem, maybe you should listen more closely to your ex-boss, Steve Jobs!

‘Carry On’ films are a genre in their own right! British humor at its best between 1958 and 1992. Slapstick, innuendo, dirty smirks and cackles. Low-budget too! For those of us that are either too young to have heard anything about them…or for those that live in places where (thankfully) the low-budget series of films all entitled ‘Carry On this’ and ‘Carry On that’ (my favorite must be ‘Carry On Regardless’ (1961)) they are a low-budget series of situational comedy sketches that had absolutely no plot. 

While the annual Harvard senior survey of graduating students always provides an informative glimpse into the past, present and future of graduates from the US' most prestigious (whether or not this is deserved is a different question) institution, the topics most interesting for us and our readers revolve, not surprisingly, around money. Here are the key observations of what students in all "non-Harvard" universities across the nation may be missing (or not).

Remember the face on the left: it belongs to Mike Hedlund, and it will become much more popular in the coming months and years, because following a historic court decision, Mike just saw the bulk of his student loans discharged following a 10 year battle with the US legal system and his student loan lenders. A decision that will open the floodgates for countless cases just like his, leading to yet another taxpayer funded bailout amounting to hundreds of billions in deferred dollars (read government debt that has to be inflated away) and for which the final bill will again be footed by... you dear US taxpayer.

Over the weekend, when discussing the latest casualty of Bernanke's disastrous monetary policy, the US corporate pension plan, we touched on a topic that has been a recurring theme on these pages: "the start of the unwind of the welfare myth, if only in the private sector for now, made worse by Ben Bernanke's endless tinkering in what was formerly a free market, should be making the guardians of the status quo very, very nervous... and certainly has the disciples of the Bismarckian welfare state delusion on their toes, because they can see very well what is coming down the road." Moments ago none other than Germany's finance minister, Schrodinger Schauble, explained just why this observation is at the core of all modern problem, going so far as using the R-word in the context of Europe (first, and then everywhere else).

Many are still wondering who (or what) stole the jam from the Japanese stock market's doughnut just three short days ago. Some blame an out-of-control bond market; others fear members of the BoJ recognizing they have blown the bubble too big too soon; still more fear the jawboning on JPY devaluation that has seemingly about-faced recently. The reality is - none of these were surprises or new to the marketplace. But in this world of free-flowing totally fungible central bank liquidity, we suspect the following chart is the real answer. Simply put, the S&P 500's bubble just couldn't keep pace with the Nikkei 225's and with USDJPY unable to support the relative price appreciation difference - the six-sigma richness of Japan to the US was just too much. Two-and-a-half months of 'outperformance' undone in 3 days leaves the question - is it over?

Peak collateral is just a notion - one we have discussed in detail many times (most recently here). The notion that at the time we want yield and growth we are running out of collateral which is supposed to underpin the high yielding assets and loans. Such a shortage would cause the ponzi-like growth that is necessary to sustain a bubble, to stall and then implode. We think our lords and rulers know this and have decided that it must not be allowed. And this – the need for collateral – is the reason for the endless QE. If this is even close to the mark, then recent murmurings about the Fed tailing off its bond buying will prove to be hollow. The Fed will quickly find it cannot exit QE without precipitating precisely the disorderly collapse, to which it was supposed to be  the solution.

For the the latest "unintended casualty" of Bernanke and his ZIRP policy, we look at corporate pension funds, which as WaPo reports, are finally starting to crack under the weight of pervasive central planning, brought to the brink by none other than the Chairman's "good intentions." On the surface this makes no sense: after all pension funds invest in assets - the same assets that Bernanke's policy of serial cheap credit funded bubble creation are supposed to inflate. And they do. The only problem is that pension funds also have offsetting matching liabilities: or the amount of money a company has to inject in order to cover future retiree obligations. And in a period of low discount rates brought by a record low interest rate environment, these liabilities painfully and relentlessly increase when discounting future cash needs. Quote WaPo: "Assets held by pension plans of the firms that make up the Standard & Poor’s 500-stock index increased by $113.4 billion in 2012, according to a report by Wilshire Associates, a consulting firm. But largely because of low rates, company liabilities increased even more: by $173.6 billion. That left the median corporation’s pension plan 76.9 percent funded, with just over $3 of assets for every $4 of liabilities."

A week ago, when the brand new Hong Kong Mercantile Exchange suddenly shuttered after being in operation for only two years, urgently settling what little contracts were outstanding, many questions were left unanswered. Such as: how it was possible that the exchange, expected by many to become the new preferred trading venue for Asian precious metals and to steal the CME's crown, could close on such short notice. This mystery deepened further after reports that the exchange barely had seen any volume, with allegedly only a tiny 200 open contracts remaining to be settled upon shuttering. Now, the confusion surrounding the HKMex closure has taken another big step for bizarrokind following news that not only have at least four HKMex senior executive have been arrested having been found to be in possession of false bank docs for nearly half a billion in dollars, but that government itself was forced to "shore up confidence" in CY Leung, Hong Kong's 3rd Chief Executive, whose former top aide was none other Barry Cheung Chun-yuen, founder of the HKMex.

Through most of the 20th century, America led something of a charmed life, at least when compared with the disasters endured by almost every other major country. We became the richest and most powerful nation on earth, partly due to our own achievements and partly due to the mistakes of others. The public interpreted these decades of American power and prosperity as validation of our system of government and national leadership, and the technological effectiveness of our domestic propaganda machinery - our own American Pravda - has heightened this effect. Author James Bovard has described our society as an “attention deficit democracy,” and the speed with which important events are forgotten once the media loses interest might surprise George Orwell.

One can read "The Lethal Presidency of Barack Obama" to get a true sense of Obama's "the best defense is a relentless drone everyone offense, ignore collateral damage and take out a few Americans in the process" policy. Or one can stare at rising stawks and enjoy their Obamaphones. Obe can't have both.